Why zero-hours contracts are a force for good

Labour’s 2017 general election manifesto pledged to ban zero-hours contracts. Putting aside the fact that the party itself uses such contracts, their policy is incredibly illiberal and would do far more harm than good.

To put the issue into context, under three per cent of UK workers are on zero-hours contracts. This is not a rampant, widespread phenomenon. The percentage has, in fact, been falling for two years.

In 2016, almost 70 per cent of those employed on the contracts were happy with their hours. The Chartered Institute of Personnel and Development (CIPD) research in 2015 suggested that those on zero-hours contracts were as happy as other workers.

When discussing the issue, Labour focuses on the fact that firms using the contracts are not obliged to provide any hours to the employees in a week. What they fail to mention is it works the other way: the employees are not obliged to accept any working hours in a week if they do not want to. This is not only useful, but it’s an absolute necessity for plenty of workers.

Students, often attending university far from home and therefore unable to commit to working every week, benefit from the flexibility that zero-hours contracts offer. Taking this away from them would be grossly illiberal and seriously damaging.

Students from less advantaged backgrounds who need to work to supplement their finances while studying would be unable to support themselves through university.

The Labour party also ignores the fact that zero-hours contracts are often a route into more permanent work. If it’s not immediately clear to an employer that a worker is right for their company, the contract’s existence means that instead of not offering a job at all, the company offers a zero-hours contract.

If the worker proves to be a good fit, they can then be offered a full-time job. If zero-hours contracts were banned outright some potential employees would simply not be offered a job at all. That is of no benefit to anybody.

Banning zero-hours contracts is part of a worrying policy trend within Labour. The party’s answer to most economic difficulties is to ban or heavily regulate. A proposed 20:1 ratio cap on highest to lowest paid workers in firms and rapidly hiking the minimum wage show this readily enough.

It is worrying because it displays the left’s profound disdain for the principles of economics around which there is a clear consensus. In short, there is no free lunch: every policy involves trade-offs of some description.

When it comes to banning zero-hours contracts, the trade-off is obvious. Some of the small minority of workers unhappy with their current situations will end up with greater job security. But, in exchange, more workers will become unemployed, and others will be forced away from their favoured zero-hours contract to one that doesn’t suit their needs.

At the core of this trend is pure populism. There is no coherent economic case for getting rid of zero-hours contracts. Banning them is a restriction on economic liberty with no benefit, and it’s a policy designed purely to mislead the public and win votes.

This is exactly the type of policymaking we must reject. No rational member of the public would argue for freedom without limits, but where limits are imposed, society must derive clear benefits from their imposition.

Zero-hours contracts in their current form are not perfect. Workers who accept multiple jobs, for example, are often penalised with fewer hours. Restrictions on the use of the contracts could be helpful and could provide tangible benefits.

Banning them outright, though, would be a grossly illiberal and ineffective approach. We must reject Labour’s tired narrative of telling us what to do and how to do it whether or not their interference is welcome – and, in most cases, it is not.